Clearwire's minority shareholders have approved the final step in the merger between Sprint Nextel and Softbank, Japan's third-largest mobile carrier. The merger is expected to close Wednesday, July 10, after the markets in the U.S. shut down for the day.
The agreement finishes what had turned out to be the diciest part of the complicated merger between the U.S.-based Sprint and the Japan-based Softbank. However, the merged companies face financial and technological challenges going forward.
They must find the resources to build out a vast nationwide Long Term Evolution (LTE) network. The companies must also find ways to attract customers in the face of fierce price competition and do it all with financial resources that are more limited than either company had originally anticipated.
The merger was more complex and more expensive than first expected because of the late entry by Dish Networks, which made a last-minute bid to acquire both Sprint and Clearwire in separate transactions. Dish eventually withdrew after Sprint raised its offer for Clearwire to $5 per share.
While Sprint already held a majority of Clearwire's stock, the merger required that a majority of shareholders not affiliated with Sprint approve the action. Approximately 95 percent of the outstanding shares of Clearwire stock were voted in favor of the merger. The companies expect to close the deal between Sprint and Clearwire on July 9, the day before Sprint and Softbank close their deal.
The Clearwire shareholder approval follows the approval July 5 by the Federal Communications Commission of the entire merger by issuing a declaratory ruling, including the issues regarding foreign ownership of a U.S. telecommunications company, as well as the transfer of the wireless licenses.
When the companies finalize their merger, Sprint will become the third major U.S. wireless carrier with a substantial foreign ownership, leaving only AT&T completely in American hands. T-Mobile is a subsidiary of German telecom giant Deutsche Telekom while 45 percent of Verizon Wireless is owned by U.K.-based Vodafone. Slightly over half of Verizon Wireless is owned by Verizon Communications in the U.S.
The move by Softbank to acquire Sprint along with Clearwire gives the combined company what may be the largest spectrum holdings of any wireless company in the U.S. Clearwire already had vast holdings suitable for 4G data communications, and when added with what Sprint already had, it puts Sprint into a very powerful position in the wireless market.
The merger with Softbank also solves Sprint's long-running financial woes along with Clearwire's impending bankruptcy. Despite their respective spectrum holdings, both companies were struggling, and Clearwire in particular needed an infusion of cash to stay afloat. Earlier this year, Clearwire's management had sent a letter to stockholders asking for approval of the Sprint buyout as potentially the only way to avoid liquidating the company.